Parallel Session 1.5: The economics of climate engineering: The recent past and the road ahead

Tuesday, 14:00 - 15:30

02 I Elysium

Economic methods are crucial for for both normative and descriptive assessments of Climate Engineering (both SRM and CDR). This session gives an overview of the current state of economic knowledge and offers room for discussing where the field should move from here.

Talks:

Solar Radiation Management (SRM) is a potential technology to offset global climate change. While probably cheap, impact heterogeneities at a regional scale are expected to imply different optimum amounts of SRM for different countries. To avoid global externalities caused by excessive SRM, discussions have brought up liability regimes as a form of governance institution. I build a theoretical model of SRM liability that takes into account two specific challenges such regimes face when moving from traditional liability settings to SRM: The definition of 'harm' and the interpretation of the negligence rule in a setting with multiple victims and third-party beneficiaries. Considering two definitions of harm, an interpretation of strict liability and three interpretations of the negligence rule, I examine the performance of different liability regimes compared to the social optimum. I find that only one of the liability regimes leads to the first-best outcome. A numerical implementation into the Regional Climate Response model (Moreno-Cruz et al. 2012) of the liability model using climate model data from the Geoengineering Intercomparison Project illustrates the findings.

Climate Engineering, and in particular Solar Radiation Management (SRM) has increasingly caught attention as climate policy option. However, its potentially strategic nature and unforeseen side effects provide major policy and scientific challenges. We study the role of the SRM implementation and its strategic dimension in a model with two regions with the notable feature of deep uncertainty modeled as model misspecification on the impacts from SRM. We find that deep uncertainty leads to a reduction in SRM deployment both under cooperation and strategic behavior, and that the effect is larger if countries act strategically. Furthermore, we demonstrate that with heterogeneity in the degrees of model confidence, only the most confident country will engage in using SRM, leading this country to “free drive”.

This paper introduces geoengineering into an optimal control model of climate change economics. Together with mitigation and adaptation, carbon and solar geoengineering span the universe of possible climate policies. We show that: (i) a carbon tax is the optimal response to the unpriced carbon externality only if it equals the marginal cost of carbon geoengineering; (ii) the introduction of solar geoengineering leads to higher emissions yet lower temperatures, and, thus, increased welfare; and (iii) solar eoengineering, in effect, is a public goods version of adaptation that also lowers temperatures.

Jessica Strefler

Almost all of the scenarios used in the 5th Assessment Report (AR5) of the IPCC that are consistent with the 2°C target rely heavily on large-scale deployment of carbon dioxide removal (CDR) technologies. The dependency on CDR can only be expected to increase for 1.5°C scenarios. However, these technologies are afflicted with uncertainties regarding potential and economic costs, adverse side effects and sustainability implications, and political feasibility.
The prevalence of CDR in AR5 scenarios on the one hand and the risks and uncertainties associated with CDR technologies on the other hand give rise to the question how much CDR is necessary to achieve climate targets like 2°C or 1.5°C and how the CDR requirement depends on short-term policies.
We use the multi-regional energy-economy-climate model REMIND to determine cost-efficient emission and technology pathways. We systematically vary the availability of CDR and the stringency of short-term policies. This allows for an analysis of the trade-off between short-term ambition, long-term CDR deployment, and economic costs.
Early mitigation provides a robust strategy which relieves trade-offs between negative side-effects from high CDR deployment and higher climate impacts. The challenge will be to find a level of effort that navigates between short-term costs, long-term costs, and CDR deployment at the same time.

Daniel Heyen is a postdoctoral researcher in economics at ETH Zurich, Switzerland. His research focuses mainly on the role of uncertainty and learning in environmental decision-making and the intergenerational and strategic challenges raised by climate engineering technologies. Daniel holds a PhD in Economics from Heidelberg University

Juan Moreno-Cruz is an Associate Professor in the School of Economics at Georgia Institute of Technology. He earned his Ph.D. in Economics from the University of Calgary in Canada, and his B.Sc. and M.Sc. in Electrical Engineering from the Universidad de Los Andes in Colombia. Moreno-Cruz arrived to Georgia Tech in August 2011, where he has worked on energy and environmental economics, in particular on questions related to climate change and energy transitions. He was recently awarded a grant from the National Academy of Sciences to work on spatial energy consumption and regional air quality. His work has influenced the direction of geoengineering research and policy and has been published in high impact journals such as Nature Geosciences, PNAS, Science, Climatic Change, Energy and Environmental Economics, and Resource and Energy Economics. Moreno-Cruz is also a Brook Byers Institute for Sustainable Systems Fellow and a Kavli Frontiers of Science Fellow.

Tobias Pfrommer is a PhD student in economics at the University of Heidelberg. His research focuses on the incentive effects liability law provides for the use of novel technologies. In the specific context of solar geoengineering, he is particularly interested in the issue of attribution of harm and the interaction of liability regimes with the strategic setting solar geoengineering provides.

Athens University of Economics and Business (AUEB) & Fondazione Eni Enrico Mattei (FEEM)

Country:

Italy

Vassiliki Manoussi is a postdoctoral researcher at Athens University of Economics and Business (AUEB) and a junior researcher at Fondazione Eni Enrico Mattei (FEEM). She achieved a PhD degree in Economics with orientation of "Environmental Economics" from Athens University of Economics and Business (Department of International and European Economic Studies) and a Master's Degree in Economics Sciences from Athens University of Economics and Business (Department of Economic Studies). Her main research interests are Environmental Economics, Spatiotemporal Analysis, Economics of Climate Change, Sustainable Development, Economics of Risk and Uncertainty, Innovation in Clean Technologies, Renewable Resources, Growth and Environmental Policy.

Gernot Wagner is a research associate at Harvard’s School of Engineering and Applied Sciences, a lecturer on Environmental Science and Public Policy, the executive director of Harvard’s Solar Geoengineering Research Program, an associate at the Science, Technology, and Public Policy Program at Harvard Kennedy School’s Belfer Center, and an associate at the Harvard University Center for the Environment. He is also a term member of the Council on Foreign Relations and a consultant for EDF.

His publications include Climate Schock (Princeton University Press, 2015) and But will the planet notice? (Hill & Wang/Farrar Strauss & Giroux, 2011).

Gernot Wagner holds a bachelor's degree in environmental science, public policy, and economics, and a master’s degree and Ph.D. in political economy and government from Harvard, as well as a master’s degree in economics from Stanford.

Jessica Strefler is a postdoctoral researcher at the Potsdam Institute for Climate Impact Research. Her current research is focused on the influence of different carbon dioxide removal technologies on global climate change mitigation strategies. She is a physicist by training and holds a Ph.D. in physics from the Technical University Berlin.